Does voluntary AI disclosure influence customer behavior? Panel evidence from Indian banks

Abstract

Artificial Intelligence (AI) is transforming banking operations, with many banks rapidly embracing the technology. In annual reports, banks voluntarily disclose information about their AI initiatives, but the extent to which such disclosures influence customer behavior remains underexplored. This study investigates the impact of voluntary AI disclosures on customer deposit behavior, with a focus on the ownership structure of banks in India. The AI disclosure index was constructed from annual reports of 12 Nifty Bank Index constituents. Using a mixed-methods approach, the balanced panel dataset over the period 2019–2023 was analyzed using a random effects model, validated through the Hausman test. Results indicate that voluntary AI disclosure positively influences the deposits, supporting the view that transparent reporting strengthens customer confidence. Public sector banks show stronger effects, with the ownership dummy yielding a negative coeffcient, suggesting that private banks face a credibility gap. Profitability had a significant influence on deposit behavior, whereas book values per share and policy repo rate were insignificant. The findings demonstrate that voluntary AI disclosure has a signaling effect, influencing customer trust, which is captured in the form of customer deposits. These results have practical implications for managers in designing disclosure and policymakers in standardizing reporting frameworks to improve reporting transparency.